The Empowered Trader by Mark Fechner

Learning to Respond to the Market, not just React

Archive for the ‘Perceptions’ Category

Documentary FLOORED – Is this suppose to be the greener side?

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In this excerpt of Floored, we look at the realm of high stress electronic trading.  The challenges don’t go away just because you now have a computer making the decisions for you.  The attractiveness of the computer screens is often overshadowed by what appears to be the lack of control.

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Written by etradingcoach

February 12, 2014 at 10:30 am

Six Sources of Trader Burnout (pt. 1)

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To say that trading is hard is stating an obvious fact.  The apocryphal factoid that 95% of all traders fail is in the back of most traders’ minds as they experience the roller coaster that is the financial market.  Regardless of this fact’s accuracy, trading amongst professional and retail traders alike experience a higher then normal turnover rate compared to other activities.

So it’s important to occasionally assess your state of mind and see if you are experiencing signs of trader burnout.  Trader burnout isn’t about having a bad trading day, but is, as Paula Davis-Laack defines in Psychology Today, “the chronic state of being out of sync with one or more aspects of your life.”  The result of this misalignment is a lack of energy, enthusiasm, and confidence in your trading activities.

So to help you understand what might cause a lack of enthusiasm for entering the market, I’ve adapted a list of six sources of potential burnout.  The first three are presented here.

  • Lack of Control – Lack of control is sort of the epitome of trading.  The very act of trading suggests that we are, at some point, willing to “give up” control to let the market do what it will with our money.  That being said, there comes a point where increase stress over a trade and the lack of control can have a detrimental effect on more than just our decision process.  Prolonged periods of stress can lead to a higher risk of coronary disease, stroke, depression, and a host of other medical conditions.  Monitoring how you are coping with stress is primary to successful trading.
  • Conflict with Values – One of the biggest challenges traders face is reconciling core values with the decisions they are making.  This often reveals itself around money, since money often has a lot of emotional significance attached to it. The challenge is understanding which core value is conflicting with a particular decision.  We know that there’s a conflict when we feel uncomfortable while making a decision, or experience immediate regret once a decision has been made.  Ignoring these feeling over the long haul can create the same amount of stress as a Lack of Control.  Creating awareness and acknowledging these feeling can lead to valuable information about how,  and more importantly why, you’re trading.
  • Insufficient Reward – There’s a old adage that says, “Sometimes you eat the bear, and sometimes the bear eats you.”  Most traders have a pretty good understanding of what this means. There will be days when everything goes in your favor, and then there will be days we’d rather forget. Overall, though, there should be some reward for the effort we’re putting forth.  A novice’s reward might be valuable knowledge about the market and their engagement in it, while veteran’s reward might be financial.  Either way, the trader should walk away with something of value.  When that is no longer the case, it’s time to reevaluate the motivations regarding your reasons for trading.

Stay tuned for the next three sources of trader burnout.

Written by etradingcoach

February 7, 2014 at 10:09 am

The Good Enough Trader*

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In our discussion so far of the seven different filters, we touched on the Defeated Trader Syndrome and the Revenge Trader. Both of these filters have been very catabolic, or have negative energy, associated with them. Remember, the 7 different levels are neither positive nor negative but they have a negative or positive quality to them. With our next level, the Good Enough Trader, we are starting to enter the more anabolic or positive quality.

The Good Enough Trader

The Good Enough Trader has the ability to rationalize everything. Think of this level like walking around with a pebble in your shoe. Instead of taking the pebble out, you change the way you walk so that you don’t notice it. Ignoring the pebble isn’t the same as dealing with it. As a trader, because of the nature of trading, we often rationalize our trading to “that’s the way the market works.” It becomes “good enough” because the market is unpredictable and $#!+ is bound to happen. But just because the market is capricious, doesn’t mean we have to be with our trading decisions. Here are some thoughts about the nature of this filter.

Characteristics

Some of the thoughts of this level:

  • Being very tolerant.
  • Willing to compromise.
  • Settling or “good enough” on what results you’re getting.

Some actions that result in this level:

  • Worry – making sure that things work out.
  • Judgment – is this really the best situation to be in?
  • Analytical – trying to think your way out of a situation.

The Good Enough Trader is very contemplative, spending a lot of time in their heads.  Because of this contemplative nature and the fact that this level is about rationalization, it’s very easy to stay in that loop of always saying that whatever your results, it’s good enough. This is where a lot of traders find themselves maintaining a breakeven type of trading result. They don’t have big losers, like when they were learning to trade, but the winners aren’t really that big either. There’s a certain amount of maintaining the status quo. Nothing too big either from a winner or loser point of view.

In the next posting, the Good Enough Trader Fired Up, we’ll talk about some of the things you can do to inject some passion in your trading and boost your trading profits. If you would like an opportunity to talk about igniting some fire in your trading, sign up for a complementary exploration coaching call. Click this link to find an available time to meet. Please include a brief description of your particular challenge in trading.

*The educational material contained is gratefully adapted from the training received at the Institute for Professional Excellence in Coaching (iPEC), its founder Bruce D Schneider, and his bestselling book Energy Leadership.

Written by etradingcoach

January 28, 2014 at 7:45 am

What Are The Requirements for Elite Trader Performance?

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In one of blogs that I follow, a discussion has arisen asking the question if trading can be taught or is it reserved for a small group of special individuals that possess some innate ability.  My feelings, not surprisingly, fall into the camp that trading is a teachable skill that anyone with the desire can master.

And that desire is really what separates the “successful” traders from the wannabes.  As with any laudable skill, playing a musical instrument, performing the perfect layup, executing the perfect golf swing, the talent to perform a skill are only second to the hard work needed to perfect that skill.  Talent can take you so far but what separates the truly elite are the hours spent learning their particular craft.

The only exception to the trading world is that unlike the arts or athletics, where the environment doesn’t change, the environment of a trader is constantly changing.  For example, I learned to play the saxophone when I was in high school and the notes of the instrument are still in the same place to this day.  How I use those notes, or what might inspire me to play one note over another will vary, but the mechanics of what I’m doing haven’t changed and I count on that consistency to be able to play.

I can’t make the same claim about trading.  The market environment that I learned to become a trader in 2002 is  very different today.  And the environment is constantly changing depending upon people’s perceptions.  The “tools” that we use as traders; indicators, oscillators and the like, are just feeding us back information that has already happen.  The “constant” to a trader’s success is within the trader themselves. Its our ability to adapt ourselves to the market environment.  How we are going to use those tools becomes more important than what tool we’re using.

And that’s why it’s even more important to be willing to spend the extra time to practice how we, as traders, are going to react in certain situations.  Giving yourself the permission to find your “sweet spot” comes with many hours of, what Christine Carter, PhD from UC Berkeley’s Greater Good Science Center calls “grit.”  In her article for Psychology Today entitled A New Theory of Elite Performance, she talks about how deliberate and persistence practice over time is a greater measure of someone’s success than any innate ability.

Written by etradingcoach

January 15, 2014 at 11:32 am

The Difference Between the Will and the Way

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We’ve all heard the phrase, “Where there’s a will, there’s a way.” It’s intended to be an inspirational quote to motivate people to tackle the hurdle that confronts them or overcome an obstacle. It sounds good but I’ve never completely understood how this is supposed to motivate me. Does it mean that if I don’t have a way, I’m without a will? Is my will so weak that I’m incapable of creating ANYTHING to find a way?

These types of phrases are what traders take with them when they sit in front of their charts deciding what they should be doing in the market. I’ve had more than one trader parrot back this phrase to me when they are explaining their trading results. It’s usually a hollow attempt to steel themselves to the incredible task of becoming “successful” traders.

The challenge, as I see it, is that we’re putting the preverbal willful horse behind the cart. We make the mistake of focusing all on the way of doing things rather than the will to do them. To put it another way, we focus all of our attention on how to become successful traders but spend very little time on why we want to become one.

Admittedly, this is really easy to do. A quick Google search on the words, “trading methods” will yield 35,700,000 responses where as “trading psychology” will only net you about 9,570,000. It’s much easier to sell the method, or the “way” of trading in contrast to the “why” or the will of trading.

Solving the puzzle about the “why” of trading is important. It does 2 things for traders. First, it’s what gives traders the will to get up the next day and find new trading opportunities. Many traders begin trading in the hopes of making money easier, faster, less stressfully. When this doesn’t happen, they inevitably give up thinking that making money is just too hard.

Second, it gives focus to traders on the way they are going to trade and narrows down those 35+ million hits on Google to a manageable number of possibilities. With so many different ways of trading, the only way to navigate the method-landscape is by taking stock of your own values and desires. This is, at least, a starting point for discovering how a trader is going to become the next William Buffett.

And there is some scientific evidence for this approach. As Dr. Elliot Berkman, Assistant Professor of Psychology at the University of Oregon writes in Psychology Today, the will and the way are two parts of a goal hierarchy in our brains. The Will is the higher function of this hierarchy and the Way are the particulars of getting the goal accomplished. If we apply this to trading, knowing what we are trading for, the bigger purpose, gives us a clearer picture of how we’re going to get there. That will, minimally, give us a better chance of achieving our trading goals.

Written by etradingcoach

December 12, 2013 at 8:00 am

Today’s Market Confusion is not in Your Head.

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The New York Times 2013 DealBook Conference in New York

Many of the conversations that I’ve been having with traders lately centers around the inability of retail traders to understand what the market is doing.  That translates into uncertainty about our individual positions in the market and what the average Joe Trader should be doing.

This situation, now more that ever, speaks to the importance of clarifying your reasons for being in the market and your reasons for being a trader.  Since predictability is even less likely, understanding your decision process becomes more important when trying to decipher your portfolio questions.

And if you doubt me, listen to what the experts are saying.  In an interview for the NYTimes’ DealBook, Larry Fink, CEO of BlackRock talks about the uncertainty regarding the market and how politics is playing a part. It’s personally comforting to know that even the “experts”, or at least those with more money than me, aren’t sure about what is going on.

Written by etradingcoach

November 15, 2013 at 11:15 am

The Defeated Trader Syndrome Empowered.*

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In the previous posting, we discussed how these filters have a positive and negative quality to them. This bears repeating because when we’re in the throes of a really bad trading session, it’s very easy to place all sorts of judgments on ourselves, our abilities, the market, and in some extreme cases, life in general. The phrases, “I’ll never get this,” or “I’ll never make a living at this” have negative connotations and can lead traders to a variety of impulsive actions. Have you ever figuratively thrown up your hands and abandoned everything you’ve been using because “it’s just not working?”

Congratulations! You’ve just identified your version of the Defeated Trader Syndrome. And if you have been trading any length of time, this is something you have experienced. Being immersed in this filter can be all consuming and feel like there’s no way out. This is perfectly normal.

Awareness

The key to overcoming this syndrome is to, first be aware. To do that, you will need to “feel” your feelings. Yes, I said the word “feel.” I know this is a four letter word in the trading world, but it’s the only way to move forward. It’s not the feeling of despair, frustration, or inadequacy that you need to avoid, but rather embrace to get out of this state of mind.

Acknowledgement

Once you become aware of what you’re feeling, the next step is to acknowledge it. You’re acknowledgement could be as benign as a few choice words to something more physical. (I knew a trader that would throw his wireless mouse across the room when he got very frustrated. He kept Logitech in business because of it.) However you choose to acknowledge the feeling, the important part is to take the awareness to the next step, which is to take action.

Action

Taking action is the way you alter your state of mind and change how you’re trading at that moment. The simplest way to take action is to step away from the computer screen. Physically get up and walk away. That simple act of walking away has amazing recuperative properties. It allows you to change your perspective and your state of mind. It gives you a fighting chance to change your decision process and make a new set of decisions.

There is obviously much more on the subject, but this is a beginning. Remember, these are generalities. How this will show up for you is very unique and may not always be the very obvious. If you would like to talk about your particular brand of the Defeated Trader Syndrome, sign up for a complementary exploration coaching call. Click this link to find an available time to meet. Be sure to give a brief description of how Defeated Trader shows up in your trading results.

In the next posting, we’ll talk about the next filter that many traders fall victim to, The Revenge Trader Syndrome.

As always, Happy Trading to One and All

Mark
eTradingCoach

*The educational material contained is gratefully adapted from the training received at the Institute for Professional Excellence in Coaching (iPEC), its founder Bruce D Schneider, and his bestselling book Energy Leadership.

Written by etradingcoach

November 14, 2013 at 8:00 am

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